Credit card debt reaches record £66bn

CREDIT card debt has soared to a record high as British families splash out in a worrying borrowing binge.

Bank of England figures yesterday showed shoppers put £339million on plastic in January – the equivalent of nearly £11million a day or £455,000 an hour.

The spending spree took the total owed on credit cards to a record £66.7billion – an increase of more than £10billion in just five years.

The surge in such borrowing has fuelled fears that households are living beyond their means and face being buried under debts they cannot pay off.

Debt charities warned they are seeing record demand for advice from families struggling with their finances and turning to their cards to make ends meet.

Banks have been accused of greedily cashing in by ratcheting up rates and fees on credit cards – even though the official Bank of England interest rate has been cut to a record low of 0.25 per cent.

Peter Tutton, head of policy at debt charity StepChange, warned that the surge in credit card borrowing ‘is an area of concern’.

He said: ‘We already estimate that over 2.5million people use credit cards just to meet everyday living costs and emergency expenses and they are the most common type of debt we see.

‘We are currently experiencing record demand for our services and as households take on more debt, it could greatly increase their vulnerability.’

But British families are not just borrowing on credit cards, the Bank report showed. Other ‘ unsecured’ lending – such as personal loans, overdrafts and car finance, but not mortgages – rose by £1.1billion in the year to January to £127.3billion.

It took the total amount of unsecured debt up to £194bil- lion – a 10.3 per cent increase on a year earlier and the most since the depths of the financial crisis in 2008.

This rise was down from a 10.9 per cent increase in November and 10.6 per cent in December.

But it was the ninth month in a row that non-mortgage debts have risen by 10 per cent or more year-on-year.

Debt levels were last rising at this pace in 2005.

Increasing numbers of motorists are also using finance deals to buy cars – fuelling fears of another dangerous debt boom in the UK.

More than one million cars were sold through finance deals last year alone, according to figures from the Finance and Leasing Association.

Gillian Guy, chief executive

‘Usually ends in disaster’

at Citizens Advice, said: ‘Consumer borrowing continues to rise at a time when people are already struggling with debts from essential household bills.

‘Turning to credit can spell problems further down the line if an unexpected event – such as the loss of a job – makes it difficult to keep up with repayments.

‘But right now, the struggle to keep on top of household bills is putting more people at risk of financial hardship.’

Baroness Altmann, the former pensions minister, said: ‘It is deeply troubling to see continued rises in consumer debt.

‘Building an economy on debt usually ends in disaster for those who take on more than they can afford.’